Challenges and Opportunities Faced by the Company

Challenges
Laws & Regulations: Every country has their own regulations and laws set
up and it will be your obligation to know them. Importers and exporters must
be aware of international laws. Research should be the first thing you do
after deciding to go global with your small/mid size company. Some products
may be banned in some countries and even though you may not be aware of
these restrictions, your company will end up in trouble if you ship those
products.
Cost: This is one of the key factors that will drive you and your company
towards international business. You must calculate all possible costs that
may be incur. How do you get the products delivered in the most economical
way? This is the question that you must find the most accurate answer for. At
the end of the day if the total cost will be more then your expectation you
may reconsider taking the risks of opening your door to international
business.
Communication Difficulties and Cultural Differences: Your business
partners overseas may not speak the languages that you know and this
could be another barrier to your business. You may think, thats what
Google Translate is for? Well, it might be a small help, for phrases like hello
and thank you, however Google Translate is not 100 % accurate. Successful
communication is the key factor in everything in our lives, and if you can not
communicate effectively how do you expect to sell or buy the correct
products in the right amounts? The transactions may not go as smooth as
you would ideally like it to be. Lets also not forget obstacles you may
experience due to cultural differences. Your relationships with people from
other cultures are enhanced when you are aware of cultural differences such
as communication styles, religious beliefs, power structures, and attitudes
toward time and work. Therefore for study and try to understand the
countrys cultural structure before you decide to do business there.
Payment Methods and Currency Rate: These are other obstacles that the
small business owner must address before accepting or placing international
orders. Countries may have different payment methods that are locally
popular, but may not be commonly used internationally. In order to secure
your business always select the safest option for you. The currency exchange
rate is also of importance. You must be aware of the currency exchange rates
at the time of buying or selling your products. Drastically changes on the
exchange rates may hit your business. We all know that every penny counts
for small businesses, so why risk it?

Shipping: We face challenges when we travel on vacation for pleasure, so

you can only imagine the added complexity of doing business across
international borders. Once you have gone through the process multiple
times, you will learn and become creative in forecasting trouble and planning
for it. At my company we learned to send the shipping documents to the
buyer as well as to the clearing agents before the shipment is sent. The
documents are then validated to ensure they are compliant with the customs
of the receiving country. We take actions on any changes required before the
products leave our warehouse. This saves time and cost for all parties
involved, especially if you are trying to meet a campaign deadline. Any
delays can be costly.
Understanding
Local
Consumers:
Entering
a
market
means
understanding the local consumers and what they look for when making a
purchase decision. In some markets, price is an important issue. In other
markets, such as Japan, consumers pay more attention to detailssuch as
the quality of products and the design and presentation of the product or
retail surroundingsthan they do to price. The Japanese demand for perfect
products means that firms entering Japan might have to spend a lot on
quality management. Moreover, real-estate costs are high in Japan, as are
freight costs such as fuel and highway charges. In addition, space is limited
at retail stores and stockyards, which means that stores cant hold much
inventory, making replenishment of products a challenge. Therefore, when
entering a new market, its vital for firms to perform full, detailed market
research in order to understand the market conditions and take measures to
account for them.
Know the Components of PESTEL Analysis: PESTEL analysis is an
important and widely used tool that helps show the big picture of a firms
external environment, particularly as related to foreign markets. PESTEL is an
acronym for the political, economic, sociocultural, technological,
environmental, and legal contexts in which a firm operates. A PESTEL
analysis helps managers gain a better understanding of the opportunities
and threats they face; consequently, the analysis aids in building a better
vision of the future business landscape and how the firm might compete
profitably. This useful tool analyzes for market growth or decline and,
therefore, the position, potential, and direction for a business. When a firm is
considering entry into new markets, these factors are of considerable
importance. Moreover, PESTEL analysis provides insight into the status of key
market flatteners, both in terms of their present state and future trends.
Firms need to understand the macroenvironment to ensure that their
strategy is aligned with the powerful forces of change affecting their
business landscape. When firms exploit a change in the environmentrather

than simply survive or oppose the changethey are more likely to be

successful. A solid understanding of PESTEL also helps managers avoid
strategies that may be doomed to fail given the circumstances of the
environment. JCPenneys failed entry into Chile is a case in point.
Finally, understanding PESTEL is critical prior to entry into a new country or
region. The fact that a strategy is congruent with PESTEL in the home
environment gives no assurance that it will also align in other countries. For
example, when Lands End, the online clothier, sought to expand its
operations into Germany, it ran into local laws prohibiting it from offering
unconditional guarantees on its products. In the United States, Lands End
had built a reputation for quality on its no-questions-asked money-back
guarantee. However, this was considered illegal under Germanys regulations
governing incentive offers and price discounts. The political skirmish
between Lands End and the German government finally ended when the
regulations banning unconditional guarantees were abolished. While the
restrictive regulations didnt put Lands End out of business in Germany, they
did inhibit its growth there until the laws were abolished.

There are three steps in the PESTEL analysis. First, consider the relevance of
each of the PESTEL factors to your context. Next, identify and categorize the
information that applies to these factors. Finally, analyze the data and draw
conclusions. Common mistakes in this analysis include stopping at the
second step or assuming that the initial analysis and conclusions are correct
without testing the assumptions and investigating alternative scenarios.

Governments and Competition: Obviously, favorable trade policies

encourage the globalization of markets and industries. Governments,
however, can also play a critical role in globalization by determining and
regulating technological standards. Railroad gaugethe distance between
the two steel trackswould seem to favor a simple technological standard.
In Spain, however, the gauge is wider than in France. Why? Because back in
the 1850s, when Spain and neighboring France were hostile to one another,
the Spanish government decided that making Spanish railways incompatible
with French railways would hinder any French invasion.

These are a few key drivers of industry change. However, there are particular
implications of technological and business-model breakthroughs for both the
pace and extent of industry change. The rate of change may vary
significantly from one industry to the next; for instance, the computing

industry changes much faster than the steel industry. Nevertheless, change
in both fields has prompted complete reconfigurations of industry structure
and the competitive positions of various players. The idea that all industries
change over time and that business environments are in a constant state of
flux is relatively intuitive. As a strategic decision maker, you need to ask
yourself this question: how accurately does current industry structure (which
is relatively easy to identify) predict future industry conditions?